The December rise in employment is especially important since one of the striking features of this recovery has been the large number of people who have dropped out of the labor force. The employment-to-population ratio is still more than 3 percentage points below its pre-recession level. This story is little changed even if we focus on prime-age workers, removing the impact of retiring baby boomers.

The decline shows up at all levels of education. While it is sharpest among less educated workers, there was a drop in employment rates of 1.6 percent among prime-age workers with college degrees and 1.7 percentage points among prime-age workers with advanced degrees. It is implausible that large numbers of highly educated workers simply decided that they no longer feel like working. The more plausible explanation is that the weak labor market has caused them to give up looking for jobs. The recent data indicate that these workers may finally be re-entering the labor force.